Investment Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Investment securities held by us are classified as either trading account assets, AFS, HTM or equity securities held at fair value at the time of purchase and reassessed periodically, based on management’s intent. For additional information on our accounting for investment securities, refer to page 140 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2022 Form 10-K.

Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in other fee revenue in our consolidated statement of income. AFS securities are carried at fair value, with any allowance for credit losses recorded through the consolidated statement of income and after-tax net unrealized gains and losses are recorded in AOCI. Gains or losses realized on sales of AFS investment securities are computed using the specific identification method and are recorded in gains (losses) related to investment securities, net, in our consolidated statement of income. HTM investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts, with any allowance for credit losses recorded through the consolidated statement of income.

The following table presents the amortized cost, fair value and associated unrealized gains and losses of AFS and HTM investment securities as of the dates indicated:

	March 31, 2023								December 31, 2022
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
(In millions)			Gains		Losses						Gains		Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	7,834	$	11	$	218	$	7,627	$	8,232	$	10	$	261	$	7,981
Mortgage-backed securities(1)	9,345		4		169		9,180		8,767		2		260		8,509
Total U.S. Treasury and federal agencies	17,179		15		387		16,807		16,999		12		521		16,490
Non-U.S. debt securities:
Mortgage-backed securities	1,576		1		14		1,563		1,642		—		19		1,623
Asset-backed securities(2)	1,702		—		24		1,678		1,696		—		27		1,669
Non-U.S. sovereign, supranational and non-U.S. agency	16,202		6		358		15,850		14,512		1		424		14,089
Other(3)	2,454		2		141		2,315		2,255		—		164		2,091
Total non-U.S. debt securities	21,934		9		537		21,406		20,105		1		634		19,472
Asset-backed securities:
Student loans(4)	110		—		—		110		116		—		1		115
Collateralized loan obligations(5)	2,437		—		31		2,406		2,394		—		39		2,355
Non-agency CMBS and RMBS(6)	266		—		6		260		237		—		6		231
Other	90		—		—		90		90		—		2		88
Total asset-backed securities	2,903		—		37		2,866		2,837		—		48		2,789
State and political subdivisions	786		3		12		777		839		1		17		823
Other U.S. debt securities(7)	1,049		—		64		985		1,078		—		73		1,005
Total available-for-sale securities(8)(9)	$	43,851	$	27	$	1,037	$	42,841	$	41,858	$	14	$	1,293	$	40,579
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	11,747	$	—	$	258	$	11,489	$	11,693	$	—	$	341	$	11,352
Mortgage-backed securities(10)	42,262		11		5,294		36,979		42,307		3		6,030		36,280
Total U.S. Treasury and federal agencies	54,009		11		5,552		48,468		54,000		3		6,371		47,632
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	7,228		1		259		6,970		6,603		—		304		6,299
Total non-U.S. debt securities	7,228		1		259		6,970		6,603		—		304		6,299
Asset-backed securities:
Student loans(4)	3,740		1		108		3,633		3,955		1		134		3,822
Non-agency CMBS and RMBS(11)	50		18		—		68		142		18		—		160
Total asset-backed securities	3,790		19		108		3,701		4,097		19		134		3,982
Total held-to-maturity securities(8)	$	65,027	$	31	$	5,919	$	59,139	$	64,700	$	22	$	6,809	$	57,913

(1) As of March 31, 2023 and December 31, 2022, the total fair value included $6.53 billion and $6.78 billion, respectively, of agency CMBS and $2.65 billion and $1.73 billion, respectively, of agency MBS.

(2) As of March 31, 2023 and December 31, 2022, the fair value includes non-U.S. collateralized loan obligations of $0.90 billion and $0.86 billion, respectively.

(3) As of March 31, 2023 and December 31, 2022, the fair value includes non-U.S. corporate bonds of $1.39 billion and $1.14 billion, respectively.

(4) Primarily comprised of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.

(5) Excludes collateralized loan obligations in loan form. Refer to Note 4 for additional information.

(6) Consists entirely of non-agency CMBS as of both March 31, 2023 and December 31, 2022.

(7) As of March 31, 2023 and December 31, 2022, the fair value of U.S. corporate bonds was $0.99 billion and $1.01 billion, respectively.

(8) An immaterial amount of accrued interest related to HTM and AFS investment securities was excluded from the amortized cost basis for the period ended March 31, 2023.

(9) As of both March 31, 2023 and December 31, 2022, total amortized cost included an allowance for credit losses on AFS investment securities of $2 million.

(10) As of March 31, 2023 and December 31, 2022, the total amortized cost included $5.29 billion and $4.99 billion of agency CMBS, respectively.

(11) As of March 31, 2023 and December 31, 2022, the total amortized cost included $42 million and $133 million, respectively, of non-agency CMBS and $8 million and $9 million, respectively, of non-agency RMBS.

Aggregate investment securities with carrying values of approximately $80.70 billion and $70.52 billion as of March 31, 2023 and December 31, 2022, respectively, were designated as pledged for public and trust deposits, short-term borrowings and for other purposes as provided by law.

The following tables present the aggregate fair values of AFS investment securities that have been in a continuous unrealized loss position for less than 12 months, and those that have been in a continuous unrealized loss position for 12 months or longer, as of the dates indicated:

	March 31, 2023
	Less than 12 months				12 months or longer				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	127	$	—	$	6,536	$	218	$	6,663	$	218
Mortgage-backed securities	3,682		41		4,859		128		8,541		169
Total U.S. Treasury and federal agencies	3,809		41		11,395		346		15,204		387
Non-U.S. debt securities:
Mortgage-backed securities	394		2		965		12		1,359		14
Asset-backed securities	276		1		1,275		23		1,551		24
Non-U.S. sovereign, supranational and non-U.S. agency	4,738		29		8,539		329		13,277		358
Other	440		7		1,657		134		2,097		141
Total non-U.S. debt securities	5,848		39		12,436		498		18,284		537
Asset-backed securities:
Collateralized loan obligations	426		5		1,851		26		2,277		31
Non-agency CMBS and RMBS	143		3		96		3		239		6
Total asset-backed securities	569		8		1,947		29		2,516		37
State and political subdivisions	199		3		241		9		440		12
Other U.S. debt securities	66		4		919		60		985		64
Total	$	10,491	$	95	$	26,938	$	942	$	37,429	$	1,037

	December 31, 2022
	Less than 12 months				12 months or longer				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	1,337	$	15	$	5,745	$	246	$	7,082	$	261
Mortgage-backed securities	5,524		130		2,815		130		8,339		260
Total U.S. Treasury and federal agencies	6,861		145		8,560		376		15,421		521
Non-U.S. debt securities:
Mortgage-backed securities	1,278		15		272		4		1,550		19
Asset-backed securities	859		11		765		16		1,624		27
Non-U.S. sovereign, supranational and non-U.S. agency	6,750		108		5,800		316		12,550		424
Other	771		27		1,233		137		2,004		164
Total non-U.S. debt securities	9,658		161		8,070		473		17,728		634
Asset-backed securities:
Student loans	89		1		—		—		89		1
Collateralized loan obligations	1,577		27		710		12		2,287		39
Non-agency CMBS and RMBS	193		6		3		—		196		6
Other	88		2		—		—		88		2
Total asset-backed securities	1,947		36		713		12		2,660		48
State and political subdivisions	669		12		42		5		711		17
Other U.S. debt securities	294		15		708		58		1,002		73
Total	$	19,429	$	369	$	18,093	$	924	$	37,522	$	1,293

The following table presents the amortized cost and the fair value of contractual maturities of debt investment securities as of March 31, 2023. The maturities of certain ABS, MBS and collateralized mortgage obligations are based on expected principal payments. Actual maturities may differ from these expected maturities since certain borrowers have the right to prepay obligations with or without prepayment penalties.

	March 31, 2023
(In millions)	Under 1 Year				1 to 5 Years				6 to 10 Years				Over 10 Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	1,505	$	1,492	$	5,781	$	5,577	$	548	$	558	$	—	$	—	$	7,834	$	7,627
Mortgage-backed securities	56		55		633		627		5,987		5,914		2,669		2,584		9,345		9,180
Total U.S. Treasury and federal agencies	1,561		1,547		6,414		6,204		6,535		6,472		2,669		2,584		17,179		16,807
Non-U.S. debt securities:
Mortgage-backed securities	120		120		321		320		—		—		1,135		1,123		1,576		1,563
Asset-backed securities	340		335		545		537		487		481		330		325		1,702		1,678
Non-U.S. sovereign, supranational and non-U.S. agency	5,815		5,759		7,371		7,100		3,016		2,991		—		—		16,202		15,850
Other	290		285		1,949		1,834		206		188		9		8		2,454		2,315
Total non-U.S. debt securities	6,565		6,499		10,186		9,791		3,709		3,660		1,474		1,456		21,934		21,406
Asset-backed securities:
Student loans	37		37		—		—		—		—		73		73		110		110
Collateralized loan obligations	118		117		383		377		1,292		1,274		644		638		2,437		2,406
Non-agency CMBS and RMBS	—		—		20		20		—		—		246		240		266		260
Other	—		—		90		90		—		—		—		—		90		90
Total asset-backed securities	155		154		493		487		1,292		1,274		963		951		2,903		2,866
State and political subdivisions	126		125		269		264		347		349		44		39		786		777
Other U.S. debt securities	231		225		789		734		29		26		—		—		1,049		985
Total	$	8,638	$	8,550	$	18,151	$	17,480	$	11,912	$	11,781	$	5,150	$	5,030	$	43,851	$	42,841
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	5,771	$	5,681	$	5,940	$	5,774	$	24	$	23	$	12	$	11	$	11,747	$	11,489
Mortgage-backed securities	144		133		583		550		4,579		3,883		36,956		32,413		42,262		36,979
Total U.S. Treasury and federal agencies	5,915		5,814		6,523		6,324		4,603		3,906		36,968		32,424		54,009		48,468
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	2,119		2,083		4,398		4,221		711		666		—		—		7,228		6,970
Total non-U.S. debt securities	2,119		2,083		4,398		4,221		711		666		—		—		7,228		6,970
Asset-backed securities:
Student loans	266		258		7		7		892		873		2,575		2,495		3,740		3,633
Non-agency CMBS and RMBS	43		49		—		—		—		—		7		19		50		68
Total asset-backed securities	309		307		7		7		892		873		2,582		2,514		3,790		3,701
Total	$	8,343	$	8,204	$	10,928	$	10,552	$	6,206	$	5,445	$	39,550	$	34,938	$	65,027	$	59,139

Interest income related to debt securities is recognized in our consolidated statement of income using the effective interest method, or on a basis approximating a level rate of return over the contractual or estimated life of the security. The level rate of return considers any non-refundable fees or costs, as well as purchase premiums or discounts, adjusted as prepayments occur, resulting in amortization or accretion, accordingly.

Allowance for Credit Losses on Debt Securities and Impairment of AFS Securities

We conduct quarterly reviews of HTM and AFS securities on a collective (pool) basis when similar risk characteristics exist to determine whether an allowance for credit losses should be recognized. We review individual AFS securities periodically to assess if additional impairment is required. For additional information about the Current Expected Credit Loss methodology and the review of investment securities for expected credit losses or impairment, refer to pages 144 to 145 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2022 Form 10-K.

We monitor the credit quality of the HTM and AFS investment securities using a variety of methods, including both external and internal credit ratings. As of March 31, 2023, 99% of our HTM and AFS investment portfolio is publicly rated investment grade.

We had no allowance for credit losses on our HTM securities as of both March 31, 2023 and December 31, 2022.

Our allowance for credit losses on our AFS securities was approximately $2 million as of both March 31, 2023 and December 31, 2022. In the first quarter of 2023, we recorded no provision for credit losses and no charge-offs on AFS securities.

We have elected to not record an allowance on accrued interest for HTM and AFS securities. Accrued interest on these securities is reversed against interest income when payment on a security is delinquent for greater than 90 days from the date of payment.

After a review of the investment portfolio, taking into consideration then-current economic conditions, adverse situations that might affect our ability to fully collect principal and interest, the timing of future payments, the credit quality and performance of the collateral underlying MBS and ABS and other relevant factors, management considered the resulting gross pre-tax unrealized losses of $6.96 billion related to 2,061 securities as of March 31, 2023 to be primarily related to changes in interest rates, and not the result of any material changes in the credit characteristics of the securities.